US Dollar Technical Forecast: USD Stalls at Key Resistance Ahead of NFP

US Dollar Index Technical Forecast: USD Weekly Trade Levels (DXY)

• DXY has rallied nearly 2% from the May lows but remains capped below pivotal resistance that has stalled the advance for the past three-weeks.
• USD is now testing the 52-week moving average within a broader downtrend structure.
• A breakout above resistance would signal continuation of the broader recovery while failure would increase the risk of a pullback toward support.
• Key event risk on tap with U.S. Non-Farm Payrolls tomorrow and CPI next week
• Resistance 99.49 (key), 100.16/42, 101.14 - Support ~98.50, 98.24 (key), 97.50/65

The US Dollar remains pinned just below a major resistance zone after a strong recovery from the May lows, with price once again struggling to gain traction above a key technical barrier. While the broader recovery remains intact, upside momentum is beginning to stall as the monthly opening range takes shape beneath resistance. The focus heading into the June open is on whether bulls can finally force a breakout or if the rally begins to fade into a larger pullback. Battle lines drawn on the DXY weekly technical chart.

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US Dollar Price Chart – USD Weekly (DXY)

Chart Prepared by Michael Boutros, Sr. Technical Strategist; DXY on TradingView

Technical Outlook: In last month’s US Dollar Technical Forecast we noted that DXY was trading just above support and that our focus was, “on a breakout of the May opening range for guidance here. From a trading standpoint, losses should be limited to the weekly low IF price is heading higher on this stretch with a weekly close above the 52-week moving average needed to fuel the next leg of the advance.” The Index broke the highs later that week with the rally extending nearly 2% off the May low before exhausting into a key technical hurdle at 99.49/54- a region defined by the 61.8% retracement of the late-March decline, the January range high, and the May high.

The focus is on a reaction off this threshold with the weekly and monthly opening range taking shape just below. Look for the breakout with the immediate long-bias vulnerable below 99.50. Initial weekly support rest with the 52-week moving average (currently ~98.50) and is backed closely by the yearly open at 98.24. Losses below this threshold would suggest a more significant near-term high is in place with subsequent support objectives seen at the 61.8% retracement of the yearly range and the 2025 low-week close (LWC) at 97.50/65 and 96.88/99- a region defined by the 2025 & 2026 low closes. Both regions represent areas of interest for possible downside exhaustion / price inflection IF reached.

A breach / weekly close above this key pivot zone exposes major resistance at 100.15/42- a region defined by the yearly high-week close (HWC), the 2024 low-week close (LWC), the August & November swing highs, and the 2024 swing low. Look for a larger reaction there IF reached. The next major technical consideration is eyed at the 38.2% retracement of the 2025 decline which converges on downtrend resistance over the next few weeks near 101.14.

 

Bottom line: The U.S. Dollar is trading into pivotal resistance for a third consecutive week with the monthly opening-range taking shape just below. From a trading standpoint, losses should be limited to the 52-week moving average IF price is heading higher on this stretch with a weekly close above 99.50 needed to fuel the next leg of this advance.

Keep in mind we get the release of key U.S. employment data tomorrow with May Non-Farm Payrolls on tap. Recent labor data paints a mixed but broadly steady labor market with the focus still squarely on the inflation side of the Fed’s dual mandate. That said, a weaker than expected report could dent interest rate expectations with Fed Fund Futures pricing a 50/50 chance the central bank will need to hike rate this year to battle rising inflation. Next week’s CPI print will be critical as traders look to assess the new Fed Chairman’s willingness to ease amid growing inflationary concerns. Stay nimble into the releases and watch the weekly closes here for guidance. Review my latest US Dollar Short-term Outlook for a closer look at the near-term DXY technical trade levels.

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--- Written by Michael Boutros, Senior Technical Strategist

Follow Michael on X @MBForex